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In This Issue

New Pipeline for Natural Gas Could Ease New England’s Capacity Shortage

Energy Regulators Say EPA's Climate Rule Poses Grid Challenges

Natural Gas and Oil Market Update

EIA - Weekly Natural Gas Storage Report

NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price


NOAA 6 to 10 Day Outlook
Color indicates the probability of forecasted temperatures being above or below a historical average for the period.


New Pipeline for Natural Gas Could Ease New England’s Capacity Shortage

Press Herald | July 31, 2014

One of the nation’s largest natural gas pipeline companies announced Wednesday that it will expand its system in New England, a move that could help ease a lack of winter capacity that has been linked to billions of dollars in higher electricity costs in Maine and the region.

Houston-based Kinder Morgan Energy Partners L.P. said it has reached agreements with local natural gas distribution companies in southern New England to transport the equivalent of 500 million cubic feet per day on an expansion of the Tennessee Gas Pipeline called the Northeast Energy Direct Project.

New England burns an average of 4.5 billion cubic feet of gas a day in the winter. Adding 500 million cubic feet, an 11 percent increase, would be the equivalent of 3.5 million gallons of heating oil a day.

Kinder Morgan said it would boost capacity through a combination of new pipelines in Massachusetts, Pennsylvania and New York, as well as additional loops, new compressor stations and other modifications from Pennsylvania to New Hampshire. Service would begin in November 2018, pending approval from federal energy regulators and state and local governments.

Kinder Morgan’s plans complement other expansion and project proposals in Maine and the region that are meant to increase supply and bring the high cost of natural gas here closer to national averages. That could lower electricity rates because half of the region’s power is generated with natural gas.

A study by the region’s power grid operator found New England homes and businesses paid $3 billion more last winter for power than they would have if adequate gas supplies were available. Increased demand during a cold snap early last December, for example, pushed wholesale natural gas prices in New England four times higher in only a week. On Dec. 14, the average price of natural gas in the Boston area was nearly $33 per million BTUs, while in New York it was only $7 per million BTUs.

Kinder Morgan’s announcement comes as the six New England governors’ proposal to increase gas pipeline capacity by nearly 20 percent in three years continues to move forward. The plan has drawn criticism because utility customers would be asked to help pay for the projects, which could cost billions of dollars, through increased electricity rates. Those costs would be quickly recovered by savings on energy bills, advocates say.

Approval in Maine is being considered this summer and fall by the Maine Public Utilities Commission.

Tom Welch, the commission’s chair and an architect of the governors’ plan, said it’s too early to say whether the Tennessee Gas Pipeline expansion would lower electric rates, or by how much.

“I think it’s significant, but it’s not a game-changer,” Welch told the Portland Press Herald. “It certainly suggests the free market can do something, but whether it’s enough to achieve the public policy goals is a key question.”

The pipeline expansion plan was welcomed by the head of New England’s largest group of business energy users.

Robert Dorko, president of the Industrial Energy Consumer Group in Maine, called the proposal “a critical first step in eliminating the energy cost crisis that every winter hammers all New England energy consumers.”

A manager at Sappi Fine Paper in Skowhegan, Dorko represents factories that were forced to shut down or reduce production for periods last winter, when electricity prices spiked. The trade group is calling for new pipeline capacity approaching 2 billion cubic feet per day.

“Today’s announcement means that the ongoing gas pipeline capacity purchase proceeding at the Maine Public Utilities Commission can determine whether New England gets the gas pipeline capacity we need,” Dorko said. “Maine can tip the balance. … We cannot miss this opportunity.”

Kinder Morgan’s proposal also was greeted enthusiastically by labor unions that help build pipelines.

John Napolitano, president of the Maine State Building and Construction Trades Council, praised the announcement as “providing economic hope for building trades members and their families, and an urgently needed lifeline for Maine and New England energy consumers who struggle every winter with high energy costs.”

Conservation groups, including Environment Northeast, are pushing back. They say pipeline expansion ignores diversified, lower-impact solutions and adds to the region’s over-reliance on gas.

“ENE remains concerned that this new pipeline may depend on unprecedented subsidies from electric ratepayers, and the public needs more information before this moves forward,” said Peter Shattuck, the group’s director of market initiatives in Boston. “Additionally, consumer demand for cost-effective cleaner alternatives – such as energy efficiency, distributed generation and advanced heating technologies like air source heat pumps – is booming, and states need to evaluate the potential for utilizing these lower-risk alternatives to meet our energy needs.”

The Tennessee expansion also is drawing opposition in western Massachusetts, where residents are concerned about gas pipelines running through their neighborhoods.

Kinder Morgan said its project could be scaled up to meet future demand and capacity as high as 1.2 billion cubic feet a day.

Energy Regulators Say EPA's Climate Rule Poses Grid Challenges

The Wall Street Jornal | July 31, 2014

President Barack Obama's proposed rule to curb carbon emissions from the nation's power plants could raise costs and affect reliability in the U.S. electricity system, federal regulators told Congress.

But the commissioners of the Federal Energy Regulatory Commission, the government agency charged with overseeing the electric grid and other parts of the nation's energy infrastructure, also said at a House hearing that the government has a responsibility to act on climate change.

As part of Mr. Obama's climate agenda, the Environmental Protection Agency is proposing to cut carbon emissions from the electricity sector by 30% by 2030 based on emissions levels in 2005. States are expected to comply with the rule by using cleaner, though potentially more expensive, energy.

Utility companies are already shifting away from coal because of the natural-gas boom and other environmental regulations. The rule is expected to accelerate the trend, which could put pressure on a grid that has been dominated by coal-fired plants.

"I think all transitions cost money, so a transition to a new resource mix because of the environment or some other reason—the long-term costs are unknown and depend on the relative cost of the fuel," said Acting FERC Chairman Cheryl LaFleur, a Democrat first nominated by Mr. Obama in 2010.

Tony Clark, a Republican commissioner, pointed to the extreme cold weather seen in many parts of the country last winter—known as a polar vortex—to say FERC must ensure that the high electricity costs and close calls with rolling blackouts that have occurred in the Northeast "aren't exported to other regions of the country."

In proposing the draft rule last month, Environmental Protection Agency Administrator Gina McCarthy said concerns about reliability were overblown, especially in connection with extreme weather.

"I'm tired of people pointing to the polar vortex as a reason not to act on climate," she said. "Efficiency upgrades that slow climate change actually help cities insulate against blackouts."

EPA spokeswoman Liz Purchia said in an email Tuesday that the agency's Clean Air Act has never caused a power outage in its 40-year history, and this latest rule won't change that record.

"Consistent with long-standing historical practice under the Clean Air Act, should a reliability challenge arise that cannot be addressed by the flexibilities in the rule, the EPA will work with states and sources to address individual circumstances on a case-by-case basis," Ms. Purchia said.

The FERC commissioners on Tuesday voiced varying levels of concern about the EPA proposal, with some expressing more optimism about how it would spur investment in renewable energy and others holding back on predictions about its effect. Much depends on what states plan to do, which won't be determined until at least June 2016.

"I think there could be challenges," said Norman Bay, a Democrat who is expected to be sworn in soon as FERC commissioner and will be chairman of the commission in nine months, a deal agreed to by Senate leaders this month. "But I think the challenges are manageable."

Democratic Commissioner John Norris was the most outspoken in support of robust climate action and a shift to a lower-carbon electricity mix. The U.S. mix is currently nearly 40% coal and 30% natural gas.

"There's a great hunger to invest in clean-energy technologies," Mr. Norris said. "This will help spur new investment."

All five commissioners said the government has a responsibility to tackle climate change—an idea many congressional Republicans criticize and don't see as a government priority.

"A nationwide cap-and-trade or some sort of nationwide system would probably be the most efficient," said Ms. LaFleur. "Given the structure of the Clean Air Act, I think EPA did a good job building in flexibility to use the authority they have."

The Republican commissioners had less-expansive answers, though they too said action was needed. "Because carbon is ubiquitous throughout the world, we need to solve it on a world-wide basis," said Commissioner Phil Moeller, who was first appointed to FERC in 2006 by President George W. Bush. "We need a market-based way."

Natural Gas and Oil Market Update

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Natural Gas Supplies Rise Less than Expected | July 31, 2014

Natural Gas supplies rose by 88 billion cubic feet in the week ended July 25, the Energy Information Administration said Thursday. Analysts polled by Platts had expected inventories of the product to increase by 90 bcf to 94 bcf. Natural-gas futures nudged higher after the report, and the September contract was recently up 6 cents, or 1.6%, to $3.85 per million British thermal units.


arrow upOil Prices Head for Worst Month Since October

Bloomberg | July 31, 2014

West Texas Intermediate crude headed for the worst monthly loss since October as U.S. gasoline demand slipped and as a strong dollar weighed on commodities.

WTI for September delivery slid 88 cents, or 0.9 percent, to $99.39 a barrel at 9:43 a.m. on the New York Mercantile Exchange. The volume of all futures traded was about 14 percent above the 100-day average. Prices are down 5.7 percent in July, the most in nine months.

Brent for September settlement slipped 33 cents to $106.18 a barrel on the London-based ICE Futures Europe exchange. Volume was 24 percent above the 100-day average. The European benchmark crude was at a premium of $6.78 to WTI on ICE, from $6.24 yesterday.

EIA - Weekly Natural Gas Storage Report

EIA - Weekly Natural Gas Storage Report


Working gas in storage was 2,307 Bcf as of Friday, July 25, 2014, according to EIA estimates. This represents a net increase of 88 Bcf from the previous week. Stocks were 530 Bcf less than last year at this time and 641 Bcf below the 5-year average of 2,948 Bcf. In the East Region, stocks were 302 Bcf below the 5-year average following net injections of 57 Bcf. Stocks in the Producing Region were 266 Bcf below the 5-year average of 1,035 Bcf after a net injection of 19 Bcf. Stocks in the West Region were 72 Bcf below the 5-year average after a net addition of 12 Bcf. At 2,307 Bcf, total working gas is below the 5-year historical range.

NYMEX Natural Gas Week-to-Week Price Change NYMEX Natural Gas Week-to-Week Price Change

Natural Gas Futures - Five Year Price ($ per mmBtu)

NYMEX Natural Gas Week-to-Week Price Change - Five Yearly Snapshot
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